Dividends

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Money can be made from stocks in two different ways, appreciation and dividends. Appreciation occurs when a stock increases in value. Then we have dividends.


Dividends are periodic payments to shareholders. Companies provide their investors with dividends to reward them for putting money into their company, similar to how companies sometimes pay bonuses to their employees. 

Not every company distributes dividends to shareholders. Since dividends come from a company’s profits, most small companies do not have the cash to issue dividends. Dividends are more common in larger mature companies. 


Dividends are paid out based on a percentage called the dividend yield. If a company decides to issue a dividend, investors can calculate their expected payment by multiplying the dividend yield by the stock’s market price. A higher dividend yield would indicate that a company will pay out a larger dividend. 


Dividend yield * Market Price = Dividend Per Share


For example, let's say the company Pane in the Glass Window Fixers decides to issue a dividend. Their stock price is $50 and they set the dividend yield at 10%. A shareholder's dividend per share would be $5.00 ($50 x 10% = $5.00). This means that they would receive $5.00 in cash for every share they owned.


Money that is not distributed as a dividend is reinvested back into the company.


We have learned a lot so far. We have covered risk, stocks, the stock market, capital gains, taxes, and more. Let’s find out what fractional shares are all about. 

Source: Investopedia | Dividend

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Disclosure: This is not an offer, solicitation of an offer, or advice to buy or sell securities, or open a brokerage account in any jurisdiction where Alpaca is not registered (Alpaca is registered only in the United States). All investments are subject to investment risks, including possible loss of the principal amount invested.
Disclosure: Alpaca does not make recommendations with regard to fractional share trading, whether to use fractional shares at all, or whether to invest in any specific security. A security's eligibility on the list of fractional shares available for trading is not an endorsement of any of the securities, nor is it intended to convey that such stocks have low risk. Fractional share transactions are executed either on principal or riskless principal basis, and can only be bought or sold with market orders during market orders.
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This is not an offer, solicitation of an offer, or advice to buy or sell securities, or open a brokerage account in any jurisdiction where Alpaca is not registered (Alpaca is registered only in the United States).

View Alpaca's disclosures at: https://alpaca.markets/disclosures

Alpaca does not make recommendations with regard to fractional share trading, whether to use fractional shares at all, or whether to invest in any specific security. A security’s eligibility on the list of fractional shares available for trading is not an endorsement of any of the securities, nor is it intended to convey that such stocks have low risk. Fractional share transactions are executed either on a principal or riskless principal basis, and can only be bought or sold with market orders during normal market hours.

The content on this website is for illustrative and informational purposes only and any historical returns, expected returns or projections are hypothetical in nature. Investing involves risk & investments may lose value, including the loss of principal. Past performance does not guarantee future returns or results. Before investing, carefully consider your investment objectives, time horizon, and overall risk tolerance as well as the information stated in the product offering prospectuses.